De Beers’s total rough diamond sales dip in fifth cycle

De Beers reported a $73m reduction in revenue from its fifth sale of rough diamonds in 2016 because of “seasonal demand patterns”, bringing total sales so far in 2016 to $3bn.

It sold $560m worth of diamonds to handpicked clients, called sightholders, and through auctions in its fifth sale event of 2016.”Sales in the fifth cycle of the year were somewhat lower than in the fourth cycle, in line with our expectations and typical seasonal demand patterns,” De Beers CEO Philippe Mellier said.

JP Morgan Cazenove analysts said the $3bn in diamond sales for the first half of the year represented 64 percent of their forecast for full-year sales, and was 22 percent higher than their expectations for first-half sales. De Beers, which is 85 percent owned by Anglo American, reported a peak of $666m in sales in April.

The largest producer of diamonds by value recorded sales of $248m in December 2015, a particularly difficult period when the market was clogged with too many rough diamonds, weak prices, and sluggish demand for diamond jewellery. De Beers and its peers, such as Russia’s Alrosa, the largest producer by volume, held back diamonds by either slowing production, closing mines, or withholding production from sale.

That strategy, combined with price reductions of more than 15 percent in 2015 for rough diamonds by De Beers, had assisted the market to a more “normal” operating environment, Mellier said in May. “Rough diamond demand and polished diamond prices remain stable, reflecting steady consumer demand, but we maintain a cautious outlook,” he said on Tuesday.

Analysts said the overall market remained uncertain.“Year-to-date rough diamond prices have been steady, which we believe is largely a function of supply-side restraint from large producers, such as De Beers and Alrosa, in late 2015,” JP Morgan analysts said.
“Price appreciation from this point will likely also require an improvement in demand, particularly in the luxury retail space,” the analysts said. “The outlook in this category continues to remain uncertain,” they said. Business Day